What is the difference between short-term and long-term capital gains?

Short-term capital gains are profits from selling assets held for 1 year or less. They are taxed as ordinary income, meaning they can be taxed at rates from 10% to 37% depending on your income level and filing status. Long-term capital gains are profits from selling assets held for more than 1 year. They receive preferential tax treatment with rates of 0%, 15%, or 20% depending on your income level. Long-term rates are significantly lower, making it advantageous to hold investments longer.

What are the long-term capital gains tax rates for 2026?

For 2026, the long-term capital gains tax rates are 0%, 15%, and 20%. The 0% rate applies to lower-income filers (up to $47,025 for single filers and $94,050 for married filing jointly). The 15% rate applies to middle-income earners. The 20% rate applies to higher-income filers who exceed the upper thresholds. These rates are lower than ordinary income tax brackets and are designed to encourage long-term investing. Your exact rate depends on your total taxable income and filing status.

Do I owe capital gains tax if my sale results in a loss?

No, you do not owe federal capital gains tax on a loss. Instead, capital losses can be used to offset capital gains. If your capital losses exceed your capital gains, you can deduct up to $3,000 of the loss against ordinary income in the current year. Any unused capital losses can be carried forward to future years indefinitely. This makes it important to track all investment transactions, both wins and losses, for tax purposes.

How do I calculate my cost basis?

Your cost basis is generally the original purchase price of the asset, including any commissions or fees paid to acquire it. For example, if you bought a stock for $1,000 and paid $10 in commission, your cost basis is $1,010. If you inherited an asset, your cost basis is typically the fair market value on the date of inheritance (called "stepped-up basis"), not the original purchase price. Record-keeping is important for accurately calculating capital gains when you eventually sell.

How do state capital gains taxes work?

Some states tax capital gains as ordinary income, while others have special capital gains tax rates or do not tax capital gains at all. California, for example, taxes long-term capital gains at ordinary income tax rates (up to 13.3%). Washington state has a 7% capital gains tax on long-term gains over $250,000. Other states like Texas, Florida, and Nevada have no state income tax or capital gains tax. Some states like Iowa tax only short-term gains. Check your state's specific rules regarding capital gains taxation.

What is the "Net Investment Income Tax"?

The Net Investment Income Tax (NIIT) is a 3.8% additional tax that applies to certain high-income taxpayers on investment income including capital gains. It applies to single filers with modified adjusted gross income over $200,000 and married filing jointly filers over $250,000. The 3.8% is applied to the lesser of your net investment income or the amount of MAGI over the threshold. This tax was established under the Affordable Care Act and can significantly impact high earners with substantial capital gains. This calculator does not include NIIT; consult a tax professional if applicable.

Capital Gains Tax Calculator 2026

Calculate short-term and long-term capital gains taxes for 2026. Enter your purchase price, sale price, and holding period. Free capital gains estimator.

How to Use This Capital Gains Tax

Enter your purchase price and sale price for the asset, specify the holding period (short-term if held less than 1 year, long-term if held over 1 year), select your filing status, and enter your annual taxable income.

Optionally add your state tax rate if your state taxes capital gains. The calculator will show your capital gain, federal and state taxes owed, and your net profit after tax. Try comparing short-term vs. long-term scenarios to see the significant tax savings from holding investments longer.

What Is Capital Gains Tax?

A capital gains tax calculator estimates the federal and state taxes you'll owe when you sell an investment (stock, mutual fund, real estate, cryptocurrency, etc.) for a profit. Capital gains taxes vary dramatically depending on how long you held the asset.

Understanding capital gains taxes helps you plan investment sales strategically, evaluate the true net returns on investments, and make informed decisions about rebalancing your portfolio. The tax difference between short-term and long-term gains can be substantial, making holding periods strategically important.

Formula & Methodology

Capital gains tax calculation depends on holding period:

Capital Gain = Sale Price − Cost Basis (Purchase Price)

Short-term Tax = Capital Gain × Ordinary Income Tax Rate (10% to 37%)

Long-term Tax = Capital Gain × LTCG Rate (0%, 15%, or 20%)

The LTCG rate is determined by your total taxable income and filing status. For 2026, single filers pay 0% on LTCG up to $47,025 of taxable income, 15% from $47,025 to $518,900, and 20% above $518,900.

Net Profit = Capital Gain − Federal Tax − State Tax (if applicable)

Practical Examples

Example 1 - Long-term Gain: You buy a stock for $10,000 and sell it for $15,000 after holding it for 2 years. Capital gain = $5,000. As a single filer with $75,000 taxable income, you're in the 15% LTCG bracket. Federal tax = $5,000 × 15% = $750. With a 5% state tax, state tax = $5,000 × 5% = $250. Total tax = $1,000. Net profit = $5,000 - $1,000 = $4,000.

Example 2 - Short-term Gain: Same $10,000 investment sold for $15,000, but held only 6 months. Same filer is in the 12% ordinary income bracket. Federal tax = $5,000 × 12% = $600. State tax = $250. Total tax = $850. Net profit = $5,000 - $850 = $4,150. Note: While short-term resulted in lower tax here, this is less typical than long-term gains having lower rates.

Frequently Asked Questions

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